We are halfway through 2021 and the global supply chain disruptions of 2020 are continuing to pose issues in the freight industry. Soaring e-commerce demand, ocean shipping instability, and motor freight capacity limits put your transportation cost control at risk.
LTL carriers typically design their rate based on freight that they want; it gives them a favorable operating ratio (OR). The impact of pricing hikes varies depending on the demands of the carrier and the specifics of your shipment. As a result, carriers are becoming increasingly selective about what kinds of freight they are accepting. For example, bulky, long, or “ugly” freight is being slapped with increased charges and additional fees. As of June 14, 2021, FedEx has cut service to approximately 1,400 LTL customers, “ in an effort to reduce terminal bottlenecks and shipping delays as unprecedented amounts of tonnage pour into the sector” (Freight Waves).
“The heavy trucking division of FedEx Corp. (NYSE: FDX) began notifying select manufacturers, retailers and logistics companies on Friday that it will stop picking up their goods as of Monday, leaving them virtually no time to make alternative shipping arrangements. Other LTL carriers are also operating at maximum capacity and may not be able to absorb more freight in the near-term” (Freight Waves).
The panic we are seeing is coming from the short, to NO, notice FedEx has given companies and the process of finding another carrier willing and able to take on new freight. With other LTL carriers already at maximum capacity, it probably won’t be long until we see them cutting service. The influence of e-commerce will continue to put a strain on freight capacity: “The impact of the virus has generated elevated volumes, and we continue to experience high demand for capacity and increased operating costs across our network...FedEx Freight will begin implementing certain volume control actions to help balance capacity with demand,” FedEx spokesperson Jim Masilak said. As a result, a carrier's market is anticipated to grow into next year. The tariff hikes that some carriers are implementing in high-capacity lanes are likely to last until capacity corrects itself in 2021.
This tight capacity is leading to rate increases in higher capacity lanes. Expect surcharge increases to remain, and likely expand in certain regions, such as California.